It looks like CS5 is doing the right display. 1-bit images comprise of solid black and solid white pixels and do not have any grayscale information. What was happening in CS4 was a pseudo conversion of 1-bit into Grayscale for display only in the Pixel Preview, mismatching the actual content. Now, in CS5, 1-bit image is shown as 1-bit, both in Preview as well as in Pixel Preview.

Definitely this is a change from from CS4, but atleast correct in nature.

As I had mentioned earlier, try applying the [Live Effect > Gaussian Blur] after you've applied the [Live Effect > Rasterize]. That cuts down a lot of noise. See if that helps. But remember to take these two effects out, when you're ready to send the files for output.

You may want to save the combination of the two Live Effects (Rasterize and Gaussian Blur) as a Graphic Style, and apply on the rasters while working. When you're done, just click on the button (circle with diagonal line) in lower part of Appearance Panel, that reads 'Clear Appearance'.

I reported the bug and called adobe support, who took around 30 minutes to pick up, then another 30 on the phone, then connection (in India) was lost when he put me on hold and never came back. They have my phone number and still no call back.

Adobe support is awful and I don't have all day to waste on the phones with them....I hope they see the bug report and figure it out.

Sure, the rasterise / blur solution works in a punishing, workflow slowing, ram destroying kind of way but it's a massive hassle compared to the old solution of previewing 1bit images with just one step (pixel preview).

Recolouring these blurred and rasterised images then becomes a massive ordeal in iteself as does moving them around on the page. My 8gb of ram is struggling though it.

Hopefully they sort this out soon with an update. Something along the lines of 1bit image preview would be nice.

This is a HUGE issue for everyone that works with 1-bit images –t-shirt and textile designers, screenprint artists, printmakers, etc.– The answer given kind of works but it is too sluggish. Everyone I've asked so far has gone back to CS4 or CS3 - no artboards :-(

I don't even know if the right people at Adobe will ever see this or they will even care about it. Most people don't bother to post or call them and they probably think this is just a few people affected. Cheers Shawn! enjoy CS4 forever :-)